PARIS — The new sobriety gripping luxury consumers is benefiting at least one brand: Hermès.

This story first appeared in the November 7, 2014 issue of WWD. Subscribe Today.

The maker of Birkin bags and silk scarves bucked a broad slowdown in the luxury segment to post a 10.6 percent sales increase in the third quarter, its best quarterly performance this year, as revenues in the Americas and Japan rebounded.

Sales in the three months ended Sept. 30 totaled 990.6 million euros, or $1.3 billion, exceeding analysts’ expectations. This performance comes on the heels of the second quarter’s 5.8 percent increase and the first quarter’s 10.1 percent hike.

“Despite the difficult environment, our model is holding up well and doing even better than holding up,” said Patrick Albaladejo, deputy managing director in charge of strategy and image at Hermès.

While, overall, Asia posted slower growth in the quarter, he noted that, from the U.S. to China, luxury consumers showed a strong appetite for quietly elegant products.

“A profound shift is taking pace in luxury consumption modes in China,” Albaladejo said. “People are becoming more knowledgeable and more selective and looking for real quality and designs that are less ‘bling bling’ and more timeless. That obviously benefits us, but in a context of consumers being more selective in their purchases.”

He said the Maison Hermès that opened in Shanghai in September got off to a flying start. Hermès did not provide figures, but the executive noted that a horse-themed exhibition on the building’s top floor was drawing an average of 1,000 visitors a day.

“For the time being, our gamble — in terms of opening a large store with lots of character outside of a shopping mall — is proving extremely profitable,” he said.

The Hermès results come in the wake of figures that show Kering’s revenue rose 3.3 percent and LVMH Moët Hennessy Louis Vuitton’s sales rose 5.7 percent in the third quarter.

Hermès maintained its full-year revenue-growth target of around 10 percent at constant exchange rates but said its operating margin could be slightly lower than its historic high of 32.4 percent, reached in 2013. Albaladejo declined to give a projection for the group’s performance in the fourth quarter.

“Things change a lot from day to day and from week to week. Many events of a non-commercial nature impact commercial results, so short-term projections are often misleading. That’s why we avoid giving guidance beyond medium-term revenue growth of 10 percent, which remains our gold standard,” he said.

As of the end of September, currency fluctuations had a negative impact of 77 million euros, or $104 million, on revenue. In the third quarter, sales at constant exchange rates were up 11.1 percent, compared with rises of 9.6 percent in the second quarter and 14.7 percent in the first quarter.

All dollar amounts are calculated at average exchange rates for the period in question.

By geographical area, third-quarter sales at constant exchange rates rose 16.9 percent in the Americas. Asia posted a 10.2 percent gain, with Japan up 16.4 percent. France rose 6.2 percent, and the rest of Europe registered a 7.4 percent increase.

“The progression in China in the third quarter of 2014 was above the regional average,” Albaladejo said.

Sales in Hong Kong were impacted by pro-democracy protests that resulted in temporary store closures and Mainland Chinese tourists cancelling or deferring visits to Hong Kong and Macau. Weak watch sales also weighed on the results for Greater China, he noted.

Japanese customers appear to have overcome the shock of the consumption-tax hike that took effect in April, Albaladejo said. “We see that the appetite for our products in Japan is intact, and since the economy is improving and confidence is rising, obviously sales are going up,” the executive reported.

In the U.S., a new generation of customers searching for “authenticity” is joining the fold, he added.

Sales of leather goods and saddlery jumped 19.3 percent at constant exchange rates during the period, supported by increased production capacity at two new sites in France. Plans to build an additional two workshops are underway.

Sales of ready-to-wear and fashion accessories progressed 9.1 percent, with silk and textiles advancing 3.6 percent. Christophe Lemaire showed his swan-song collection as artistic director for women’s ready-to-wear in October, and his successor, Nadège Vanhee-Cybulski, is set to make her debut in March.

Perfumes registered an 11.8 percent gain, while watches fell 14.4 percent amid continued destocking in Asia following a government anti-corruption campaign in China.

Shares in Hermès International closed up 0.4. percent, to 248.90 euros, or $315.73, on the Paris Stock Exchange.

RELATED CONTENT: WWD Earnings Tracker >>

load comments
blog comments powered by Disqus